South Korean Banks Prepare for Stricter Lending Rules

(MENAFN) Banks in South Korea are preparing to impose stricter lending rules in the second quarter of 2025 due to growing economic uncertainty, according to a survey released Tuesday by the central bank.

Based on the Bank of Korea (BOK)'s survey of 203 financial institutions carried out from March 4 to 14, the lending attitude index dropped to minus 6 for the April-June period, down from 7 in the previous quarter.

An index below zero indicates more lenders are planning to tighten credit conditions than those looking to relax them.

While lending standards for large companies improved slightly, with the index rising from 3 to 6, the index for small businesses fell from zero to minus 6.

The shift comes amid heightened economic uncertainty, spurred by the recent imposition of U.S. tariffs, which has raised concerns particularly for smaller enterprises.

The mortgage loan index for households experienced a sharp drop, falling from 14 in the first quarter to minus 6 in the second. Similarly, the index for other household loans, including unsecured credit, declined from 8 to minus 8.

In response to economic pressures, the BOK has lowered its base interest rate three times over recent months—cutting it by 0.25 percentage points in February, following two similar reductions in October and November of last year.

The household credit risk index rose from 8 to 17 quarter over quarter. For small businesses, the index held steady at 22, while for large corporations, it climbed from 6 to 8.

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